AMD to cut manufacturing orders for 2013

Reuters

Posted:
12/06/2012 02:42:07 PM PST

Updated:
12/06/2012 03:17:44 PM PST

SAN FRANCISCO -- Advanced Micro Devices will scale back on purchases from manufacturing partner GlobalFoundries in 2013, helping the struggling microprocessor company conserve cash as the personal computer market continues to decelerate.

A distant runner-up to Intel (INTC), AMD is trying to raise capital and arrest steep declines in revenue alongside the declining PC market, on which it depends for the lions' share of its revenue.

The Sunnyvale company divulged plans last month to sell and lease back its campus in Austin, Texas, to raise cash and fund its chipmaking business.

On Thursday, AMD said it had struck a deal with GlobalFoundries to amend its existing wafer supply agreement with the foundry, which was created mainly by spinning off AMD's manufacturing operation.

Under a third amendment to the agreement, AMD will lower wafer purchase commitments for the fourth quarter of 2012 to about $115 million, and for fiscal 2013 to $1.15 billion.

Along with lowered payments for research and development, the agreement with the foundry partner should allow AMD to return to free cash flow generation by the second half of 2013, the company said in a statement.

CEO Rory Read has said he does not expect the PC market, which accounts for about 85 percent of AMD's business, to recover for several quarters.

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The growing popularity of Apple's (AAPL) iPad and Google (GOOG) Android devices have sapped demand for PCs. With Chinese and European economic growth slowing and the U.S. recovery tepid, global PC shipments are expected to decline slightly this year -- the first annual drop since 2001.

AMD, one of Silicon Valley's oldest chipmakers, has been laying off engineers while looking for new markets and trying to slow the pace at which it burns through cash. Its cash declined by $279 million in the third quarter to $1.48 billion, and the company has reduced its "optimal" cash target to $1.1 billion from $1.5 billion.